Addis Ababa, Ethiopia
16 July 2026

Alemayehu Ketema General Contractor (AKGC) has taken note of the recent media reports, initially published by Capital newspaper and subsequently circulated through various media outlets and social media platforms, concerning the Federal Auditor General’s performance audit findings on the Welmel Irrigation Project and the Chelchel Dam and Appurtenant Structures Construction Project.

Alemayehu Ketema General Contractor fully supports the principles of transparency, accountability, and the constitutional and legal mandates of both government institutions and the media. However, we are deeply concerned that certain media reports were published without seeking or incorporating the company’s response, presenting only one side of the matter and drawing conclusions without reflecting the contractor’s position.

Furthermore, AKGC has not yet been officially provided with the complete performance audit report. Accordingly, upon receipt of the full audit report together with all supporting evidence, the company reserves its right to submit a comprehensive technical and legal response addressing all findings and observations contained therein.

Without prejudice to that right, and based on the information currently available through the published news reports, AKGC wishes to provide the following preliminary clarifications regarding the principal issues raised.

Price Adjustment

With respect to the allegation that repeated contract amendments were made in violation of contractual provisions prohibiting price adjustment in both projects, the company wishes to clarify the following:

Chelchel Dam and Appurtenant Structures Construction Project
The allegation is factually incorrect. The Chelchel project contract agreement allows price adjustment. Consequently, the audit conclusion appears to have been reached without adequate consideration of the actual terms and conditions of the construction contract agreement, and the conclusion reached in this regard is therefore not supported by the contractual documents.

Welmel Irrigation Project
While the original Welmel contract contained a provision stating that price adjustment was not applicable, the unprecedented escalation in the prices of construction materials, fuel, machinery, transportation, and other essential inputs during project implementation created extraordinary circumstances beyond the control of the contractor.

In response to these nationwide economic conditions, the Federal Ministry of Finance and the Public Procurement and Property Authority (PPPA) issued directions and approvals permitting contract amendments to address the effects of exceptional inflation. Acting upon these government directives, the Ministry of Irrigation and Lowlands, as the employer, formally amended the contract to allow the implementation of a price adjustment mechanism.

Accordingly, the contract amendment was implemented strictly in accordance with the directives issued by the competent government authorities and was carried out through the legally prescribed contractual procedures. Therefore, the price adjustment was lawful, properly authorized, and fully compliant with applicable government policies and contractual amendment procedures. It should not be interpreted as an unauthorized or unlawful modification initiated by the contractor.

Regarding the allegation that improper variation orders were executed, AKGC wishes to clarify that variation orders are a standard contractual mechanism implemented for legitimate engineering and contractual reasons. Such variation orders are not initiated unilaterally by the contractor.

The variation works executed under both projects resulted from:

• Approved design revisions. The contractor’s responsibility is limited to construction works, while the design is prepared and approved by the employer and the consultant. The contractor merely executes the works in accordance with the approved design.
• Changes in quantities of work.
• Unforeseen subsurface and geological conditions encountered during construction.
• Additional rock excavation requirements where the original contract primarily provided for earth excavation.
• Additional engineering works formally instructed and approved by the employer, the engineer, and the Public Procurement and Property Authority (PPPA).

Accordingly, all variation orders were processed through the contractual approval procedures and therefore cannot be characterized as illegal or unauthorized activities.

With respect to the increase in the contract price, AKGC emphasizes that all contract price adjustments resulted solely from approved variation orders, legally executed contract amendments, and officially authorized price adjustment mechanisms implemented to address extraordinary economic circumstances.

These adjustments were processed in accordance with the applicable contractual provisions and relevant government directives. A clear example is the Welmel Irrigation Project. At the time the contract was signed, the price of diesel fuel was ETB 20.91 per litre. By the time the project was completed, the diesel price had increased to ETB 107.93 per litre, representing an increase of approximately 416.16 percent, or more than five times the original price.

This unprecedented inflation had a substantial impact on construction costs. Recognizing these extraordinary economic conditions, the government authorized the implementation of price adjustment through directives issued by the PPPA and subsequent contract amendment instructions issued by the Ministry of Irrigation and Lowlands.

Accordingly, the contract price adjustments were implemented lawfully and in full compliance with government policy and contractual procedures.

Regarding the allegation that the projects experienced unjustified delays due to poor contractor performance, AKGC categorically rejects this assertion.

The extensions of time resulted from circumstances beyond the contractor’s control, including:

• Design revisions;
• Approved variation works;
• Unforeseen geological and subsurface conditions;
• Exceptional inflation and market instability;
• Shortages of construction materials and fuel;
• Delays in obtaining administrative approvals; and
• Decisions and instructions issued by the employer.

Under the conditions of contract, these events constitute legitimate grounds for extension of time (EOT). The employer formally granted the corresponding extensions of time, and the contractor completed the works within the approved revised completion periods. Consequently, no delay damages (liquidated damages) were applicable under the contract.

With particular reference to the Welmel Irrigation Project, AKGC successfully completed and handed over the project within the approved contractual completion period while maintaining the required quality standards and without excessive cost escalation. The company is recognized as one of Ethiopia’s leading water works contractors, and the project stands among the few irrigation projects completed successfully under such challenging national economic conditions.

Therefore, the media reports suggesting that project progress remained limited or that delays resulted from contractor incapacity do not accurately reflect the actual contractual performance or the project’s successful completion.

Regarding the allegation that more than ETB 132 million was spent on the procurement of three luxury vehicles outside the contract, AKGC wishes to clarify that this assertion is inaccurate and does not reflect the contractual arrangements.

The vehicles were procured exclusively to facilitate day-to-day project supervision, inspection, monitoring, and technical support for the employer’s engineers and consultants. Their procurement was carried out in accordance with approved contract amendments and formed part of the employer’s project supervision requirements. This practice is standard in large civil engineering and infrastructure projects, both in Ethiopia and internationally.

The contractual arrangement operates as follows:

• The vehicles are registered under the project (Code-3 registration) and are dedicated exclusively to project supervision and monitoring by the employer and the engineer.
• Following project completion and handover, ownership of the vehicles is formally transferred to the employer. The vehicles are re-registered as government property (Code-4 registration) and become permanent assets of the government.

This practice is widely adopted in major infrastructure projects implemented by Ethiopian public institutions such as the Ethiopian Roads Administration (ERA), Ethiopian Electric Power (EEP), and the Ministry of Water and Energy. Similarly, internationally financed projects administered under FIDIC conditions of contract, including those financed by the World Bank and the African Development Bank (AfDB), routinely require contractors to provide vehicles and other facilities for the employer and the engineer as part of the contractual obligations. Accordingly, the vehicles in question were lawfully procured, formally handed over, and are currently owned and utilized by the employer for official project supervision purposes.

Therefore, contrary to certain media reports, the vehicles are neither owned by AKGC nor retained for the company’s private benefit. They are government assets acquired and transferred in accordance with the contract and applicable legal procedures.

The audit report states that the additional 10 percent paid in connection with the procurement of light vehicles constituted profit or an undue financial benefit to the contractor. This conclusion is inaccurate and does not reflect the actual contractual and administrative arrangements. The additional 10 percent was not paid as contractor profit. Rather, it represents the standard cost required to facilitate the complete procurement and transfer process of the vehicles to the employer. These costs include, but are not limited to:

• Insurance premiums;
• Import clearance and customs documentation;
• Vehicle registration;
• Ownership transfer procedures;
• Administrative processing costs; and
• Other statutory and logistical expenses necessary to legally deliver the vehicles to the employer.

Accordingly, characterizing this amount as an unlawful profit or financial advantage obtained by the contractor is technically and contractually incorrect. It merely represents the legitimate administrative and implementation costs associated with the lawful procurement, delivery, registration, and transfer of ownership of the vehicles to the employer.

The audit report further alleges that the procurement of seven field vehicles valued at approximately ETB 75 million was processed through a fraudulent Interim Payment Certificate (IPC), falsely presented as completed construction work, thereby generating an additional ETB 6 million in profit and service charges for the contractor. This allegation is factually incorrect. With respect to the Welmel Irrigation Project executed by Alemayehu Ketema General Contractor, only two field vehicles were procured for the employer’s project supervision activities. These vehicles are currently in the possession and use of the employer and were delivered in accordance with the approved contractual requirements.

Furthermore, Alemayehu Ketema General Contractor has not received any unlawful financial benefit, profit, or unauthorized payment from the procurement of any vehicles or other assets. All payments related to vehicle procurement were processed through the contractual procedures approved by the employer, the engineer, and the relevant government authorities in accordance with the applicable procurement and contract administration procedures.

Alemayehu Ketema General Contractor firmly believes that any assessment of the Welmel and Chelchel irrigation projects must clearly distinguish the respective responsibilities of the following parties:

• The employer;
• Consultants and designers;
• Regulatory authorities;
• Supervising engineers;
• Alemayehu Ketema General Contractor (the contractor); and
• Other contractors implementing separate projects with similar project names in the surrounding areas.

Therefore, attributing all project-related deficiencies to the contractor without conducting a comprehensive review of the contractual documents, technical records, engineering approvals, and supporting evidence is neither technically justified nor legally appropriate.

Our company remains fully committed to cooperating with any lawful, impartial, and evidence-based investigation and stands ready to provide all relevant contractual, technical, financial, and administrative documentation to the competent authorities whenever requested.

Our company is deeply concerned that serious allegations capable of damaging its professional reputation have been published and widely circulated without first seeking the company’s official position or reviewing the complete contractual and supporting documentation.

While Alemayehu Ketema General Contractor fully supports freedom of expression and freedom of the press, these rights must always be exercised together with the professional obligations of accuracy, fairness, verification, impartiality, and responsible journalism.

Publishing incomplete, misleading, or unverified information that harms the reputation of individuals or institutions may give rise to legal liability under the laws of the Federal Democratic Republic of Ethiopia. Accordingly, the company respectfully calls upon:

• All media organizations;
• Journalists and publishers responsible for the reports; and
• Any public officials or institutions that disseminated incomplete or inaccurate information,

to review the supporting contractual and technical documents and provide appropriate clarification, correction, or balanced coverage.

Should inaccurate statements continue to be published without correction, or should the company’s documentary evidence continue to be disregarded, Alemayehu Ketema General Contractor reserves all rights available under Ethiopian law, including the right to seek appropriate legal remedies and compensation for any damages arising from defamatory or misleading publications. The company therefore respectfully requests that a fair, impartial, and evidence-based review be undertaken so that the facts are properly established and any necessary corrective measures are implemented.

For more than 38 years, Alemayehu Ketema General Contractor has been one of Ethiopia’s leading indigenous construction companies, successfully delivering major national infrastructure projects that have significantly contributed to the country’s economic and social development. The company continues to pursue its vision of becoming one of the leading contractors in East Africa by maintaining the highest standards of engineering excellence, quality construction, contractual compliance, integrity, and professional ethics.

Accordingly, the company categorically rejects any allegation suggesting that it independently initiated unauthorized contractual amendments or obtained improper financial benefits from works implemented under government directives, approved contract amendments, engineer’s instructions, employer approvals, or legally established public procurement procedures.

The company firmly believes that an independent and comprehensive review of all project documents, contractual records, technical approvals, and supporting evidence will clearly demonstrate that Alemayehu Ketema General Contractor fulfilled its contractual obligations in full compliance with applicable laws, contractual provisions, and Government of Ethiopia directives.

Sincerely,